WCA July 2007

Telecom News

providing services in Europe for US-based companies. If its Italian initiative had succeeded, a relatively modest investment would have gained AT&T an expanded presence in countries where Telecom Italia has been building broadband Internet businesses – Germany, France, and the Netherlands. Barely had AT&T abandoned its bid for a stake in Telecom Italia than the Spanish group Telefónica SA and a group of Italian investors agreed to pay $5.6 billion for an 18% stake in the coveted Italian company. As announced 28 th April in a statement to the Italian stock exchange, Telefónica and its Italian partners – Assicurazioni Generali SpA, Intesa Sanpaolo SpA, Mediobanca SpA, and the prominent Benetton family – will buy into Olimpia, the investment house that controls Telecom Italia’s board, from Pirelli & C SpA. Telefónica, already Europe’s second-largest phone company, will thereby strengthen its strong presence on the continent and also in Latin America, especially Brazil, where it is very active. ✆ Motorola withdraws its unfairness case against India’s BSNL The American telecom equipment maker Motorola said on 16 th April that it would drop a court case charging the Indian state-run company BSNL Ltd with unfairly disqualifying it from bid- ding on a large contract. In November, after Motorola filed its complaint, the Delhi High Court temporarily stopped BSNL from awarding a contract estimated to be worth $5 billion to lay phone lines and supply advanced telephone equipment. BSNL is the only company offering landline and mobile phone services throughout India. Other bidders for the valuable contract included Sweden’s Ericsson AB, Finland’s Nokia Corp, Germany’s Siemens AG, and the Chinese telecom giant ZTE. Motorola was dismissed from the bidding pro- cess on alleged technical grounds, whereupon Ericsson emerged as favourite. “Withdrawal of the case by Motorola in no way reflects any change in Motorola’s original position that its bid was in compliance with the tender conditions,” the Schaumburg, Illinois-based company said in a statement.

Large-scale trial of Chinese-backed TD-SCDMA standard alerts international vendors to its commercial significance

The Chinese companies ZTE and Datang Mobile would appear to hold an early advantage over rivals as suppliers of equipment for wireless networks based on the TD-SCDMA ‘third generation’ standard favoured by China for mobile telecommunications. Promoters of TD-SCDMA (time division- synchronous code division multiple access) proclaim its superiority, although WCDMA, favoured in Europe, and the US-backed CDMA2000 hold a substantial lead in terms of numbers of users. Mure Dickie, the Beijing correspondent of the Financial Times (London), took note of a statement made on 9 th April by the industry group promoting the Chinese-backed standard. The TD-SCDMA Forum said that ZTE and Datang would between them supply more than 80% of 3G base station equipment to be used by China Mobile, the country’s dominant wireless operator, for ‘trial’ TD-SCDMA networks in eight cities. (‘Chinese Telecom Suppliers Set for 3G Win,’ FT.com, 10 th April). The implications for Nokia Siemens Networks and Ericsson, among others, are clear. Mr Dickie pointed out that the success of ZTE, which alone is now expected to account for nearly half of initial equipment orders for the networks, could make the international vendors struggle to maintain their share of the world’s largest mobile market. Nor were prospective investors slow on the uptake. Shares of ZTE climbed more than 13% in Hong Kong on 9 th April despite the company’s warning that it had yet to sign any contracts and that investors should ‘pay attention to risk.’ Interested parties also did without input from China Mobile. The company withheld comment on the preliminary results of its tenders for equipment for the trial networks, estimated at $5.2 billion. Mr Dickie observed that, while ZTE makes equipment for all three 3G standards, late last year it was cited by analysts at Citigroup as the manufacturer best placed to benefit from the introduction of TD-SCDMA networks. He wrote: “The unusually large-scale trial is widely seen as an attempt to give TD-SCDMA’s developers more time to get it ready to compete against WCDMA or CDMA2000.” Chen Haofei, secretary general of the TD-SCDMA Forum, told the Financial Times that companies such as Finland’s Nokia and Sweden’s Ericsson – both non-members of the forum – had not focussed enough attention on TD-SCDMA. “However,” said Mr Chen, “I am feeling that they are now changing their attitude.”

AT&T abandons its effort to buy into Italy’s largest telecom On 16 th April, the US telecom giant AT&T withdrew its offer to buy a stake in the company that controls Telecom Italia for about $2.7 billion. While it gave no reason for dropping its quest to acquire a one-third stake in the controlling company, Olimpia, AT&T apparently decided not to resist the intense political pressure in Italy against a sale to a foreign company. Pirelli, which controls Olimpia, had been in exclusive talks with AT&T and America Móvil, the largest cellphone company in Latin America, which also was trying for one-third ownership of Olimpia. Reuters reported on 17 th April that America Móvil said it had not yet decided whether, on its own,

to continue negotiations with Pirelli. America Móvil is 9% owned by AT&T, whose further intentions in the matter are likewise unknown. When it became known, on 1 st April, that AT&T and America Móvil had made firm offers for Telecom Italia, lawmakers in Prime Minister Romano Prodi’s government objected strenuously, claiming that the strategic importance of the largest Italian telecommunications company was too great to allow it to pass out of Italian hands. While Mr Prodi said he would not outright block the sale, he and several of his ministers made plain their preference for an ‘Italian solution.’ AT&T’s position in Europe is such that its disappointment over Telecom Italia, while sharp enough, is probably not acute. It already sells telecom services to some of the largest European companies, as well as

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Wire & Cable ASIA – July/August 2007